Crypto Analysis: The Best and Worst Features of Cardano
If you've done some basic research on crypto besides Bitcoin, you've probably stumbled across one of the most popular altcoins, Cardano. While its price isn't nearly as high as BNB or Ethereum, let alone Bitcoin, Cardano's native token, $ADA has one of the highest market caps.
Cardano's market cap is $13.34B placing it in the top ten cryptocurrencies according to one of the most popular crypto tracker websites, CoinMarketCap. However, while many people start researching crypto because of the opportunities for financial gains, there's much more to it than that.
Believe it or not, cryptocurrencies aren't only a number that fluctuates but often have various other uses. I will go through some of the features of Cardano that can help you decide whether this cryptocurrency seems worth interesting.
Of course, keep in mind that I'm not going to give any financial advice but rather a breakdown of this project and its advantages and flaws. Even if a cryptocurrency seems innovative and useful as a project, the high volatility of the market can still negatively impact it's price.
Cardano explained
Let's start with a basic explanation of what Cardano is, and its history. Cardano is an open-source, decentralized blockchain that allows users to make transactions using its native token, $ADA. You can buy Cardano on major exchanges just like you would other cryptocurrencies.
The person behind Cardano is one of the co-founders of Ethereum, Charles Hoskinson, which gave it authority and reputation as soon as it launched. The reason why Charles decided to step away from Ethereum and create its own blockchain is because of a disagreement with another co-founder, Vitalik.
Just like Ethereum, Cardano is proof-of-stake which makes it more eco-friendly than proof-of-work blockchains. So similarly, the primary use of $ADA is for staking, delegating, and making transactions with other users. The proof-of-stake mechanism is achieved by Cardano's algorithm called Ouroboros. You can store ADA in wallets or on exchanges, depending on your needs.
This mechanism allows users to be awarded for staking their $ADA, and they validate transactions in return. $ADA holders aren't only eligible to receive awards for staking but they can participate in the governance system. This means that they can vote on proposals and influence the changes that happen to the system.
Cardano's governance system is transparent and decentralized, as it allows community members to influence the direction in which the project moves.
Many popular blockchains are developed using Java, C++, or Rust. Cardano is based on Haskell. This programming language isn't object-oriented like the ones mentioned above, but it's rather a functional programming language.
Notable Advantages
Although its transaction speed is much slower than the speed of some of its competitors, 250 TPS achieved by Cardano is still considered a high number . Cardano makes up for this because of the community involvement and slow development. An upgrade for Cardano's Layer 2, called Hydra, is supposed to increase the number of transactions per second to 1000.
With the use of layered architecture and Ouroboros, an algorithm that I mentioned earlier, Cardano is optimized for scalability and improvement. The two layers that the architecture has are the settlement layer and the computational layer. Basically, Cardano can potentially grow to any size, and this is further enhanced by the use of sidechains and off-chain transactions.
Just like other proof-of-stake blockchains on the market, Cardano consumes much less energy than Bitcoin for example. This makes Cardano much more eco-friendly than PoW blockchains. Along with this, the transaction costs are much smaller than on Ethereum or Bitcoin.
The built-in smart contract support allows developers to deploy decentralized applications, or dApps, on the platform.
Although I mentioned that Cardano is at risk of centralization since a significant amount of ADA is in the hands of its developers, It's still designed to be highly decentralized. This approach enables a democratic and transparent choice-making process.
Like many other popular blockchains, Cardano is interoperable with other blockchain networks and financial systems. Interoperability is one of the major focuses of Cardano's developers as the platform is collaborating with various academic and financial institutions as well as other crypto projects.
Not many crypto projects can brag about partnering with important governing bodies or countries. This is a significant representation of Cardano's potential and the way that it's on the road of widespread adoption. Ethiopia and Georgia are countries whose academic institutions are using Cardano for credential verification software.
Ethiopia is also in the process of investigating other ways in which Cardano can be deployed in their country. This is the case for the coffee supply chain and digital IDs.
Problems that Cardano faces
The idea of widespread adoption of decentralized finance, or DeFi, is one of the main motivations behind various crypto projects. DeFi wants to avoid banks and centralized financial institutions and give individuals more power over their money. On top of that, the recent growth of NFTs and the play-to-earn projects attracted new people to the crypto community.
While there has been a growing popularity of blockchains such as Ethereum and Solana, where there are various projects in the mentioned categories, Cardano isn't used as much as those two examples. Overall, Cardano is a general-purpose PoS blockchain, and it has serious competition in this field.
As mentioned earlier, the governance system is made to be transparent, and basically, anyone with a certain amount of ADA can participate. The problem, however, is the fact that the majority of ADA is in the hands of a couple of entities that have a significant impact on how the decisions are made.
Even though it's not only Cardano that has this problem, it should be mentioned when talking about any cryptocurrency. This market is incredibly volatile and unpredictable, and many people consider crypto a speculative asset that doesn't have real value. The problems that were caused by various crypto scams negatively impacted the reputation of this industry.
ADA price reached its all-time high in September of 2021, and its value has significantly decreased since then. Besides the market situation that obviously impacted this price, many people consider Cardano an unfinished product as it has limited utility compared to other blockchains.
However, even though these updates are being implemented more slowly, this happens for a good cause. Cardano uses peer-reviewed research to develop its technology, and this minimizes the chances of making wrong decisions. The problem with this process is that it's lengthy and complicated, but it has its benefits.
Cardano compared to other cryptocurrencies
Even though it's been around for a while, and its founder is one of the co-founders of Ethereum, this blockchain still hasn't reached the popularity and attention like Bitcoin and Ethereum did. On top of this, relatively new competitors beat Cardano in some categories. One of the third-generation competitors, Solana, has 3000 TPS, while Cardano has only 250.
Although the largest Altcoin, Ethereum, has a much greater market cap and price, it has a TPS of only up to 15, which is quite slow. On top of this, ETH is notorious for high gas fees.
The reason behind Solana's speed is its unique proof-of-history mechanism. Solana and Polkadot also have a significant NFT and play-to-earn ecosystem, and Cardano has a significantly smaller number of them.
Even though it's nearly as much popular as Bitcoin, Cardano has some significant advantages over the OG. The PoW system of Bitcoin is terrible for the environment, and the infrastructure is quite limiting in terms of scalability.
There are third-party solutions for Bitcoin's lack of smart contract functionality, but Cardano has in-built support for creating and deploying dApps. Of course, Bitcoin is much more widely accepted as a form of payment and investment.
Cardano is worth researching
Just like any other cryptocurrency, Cardano has some flaws. However, in the long run, a reputable and educated team is working on this project, and they will surely continue developing it in the right direction. This project is taken seriously by many, and even certain governmental institutions in countries such as Ethiopia are looking for ways to implement it.
Various advantages of Cardano make it attractive for research, and the project has seriously advanced since its launch. I'm not going to recommend investing in this cryptocurrency with the intention of having financial gains, as it's just as volatile as any other.
Hopefully, this article helped you understand what some of the best and worst features of Cardano are and whether you want to be a part of its community, invest in it, or do some additional research. Cardano also has an ambassador program where you can be awarded for helping the project grow.
About Writer
Veljko is a student of information technology that paired his passion for technology with his writing skills. He enjoys researching topics such as robotics and programming and cultivates his knowledge in philosophy, classical literature, and fitness. Veljko is currently a marketing specialist for a large NFT marketplace and launchpad called NFTb.
Linkedin: https://www.linkedin.com/in/veljko-petrović-699ab0201/
Written by Veljko Petrović